How to Avoid Missed Opportunities with the ERTC

August 24, 2023
Dayes Law Firm

The Employee Retention Tax Credit (ERTC) is a valuable credit designed to help business owners who struggled during the pandemic. If you’ve heard of this credit, you may have shied away from applying because you thought you didn’t qualify.

This is a huge mistake because there are more ways to qualify for the ERTC than you might imagine. Below, learn how to avoid missed opportunities with the ERTC that could cost you thousands of dollars.

Don’t Assume Your Business Isn’t Eligible

As a business owner, the ERTC program allows you to claim up to $5,000 per employee for 2020 and up to $7,000 per employee per quarter for 2021. The catch is that you’ll have to qualify first.

You can qualify in one of two ways:

  • Your business shut down in response to a government order in 2020 or 2021
  • You had a big drop in gross receipts during 2020 or 2021

Note that your business didn’t have to shut down fully to claim the credit. Any disruption to business operations could make you eligible. For instance, if you own a restaurant and put into place a limit of customers who could be seated outdoors, you may qualify. You could also qualify if one of your vendors closed down, and that closure negatively impacted your business.

Even if your business didn’t shut down, you might still qualify through the gross receipts test. For 2020, you must have experienced a drop of at least 50% in gross receipts. The Consolidated Appropriations Act (CAA) relaxed this restriction in 2021, allowing businesses to qualify with a drop in gross receipts of just 20%. 

Don’t Forgo the ERTC If You Took a PPP Loan

One of the biggest missed opportunities with the ERTC is assuming you can’t claim the credit if you took a Paycheck Protection Program (PPP) loan. That was true in 2020, but the CAA now allows you to claim the credit even if you’ve taken a PPP loan before.

However, wages paid by a PPP loan aren’t eligible for the ERTC.

You May Qualify Regardless of Your Sales or Tax Liability

If your sales increased past the limit in 2020 or 2021, you might think that disqualifies you from receiving the ERTC. The good news is that you can claim the credit for specific calendar quarters in which your gross receipts dropped below the limit.

It also doesn’t matter if your business was in loss or paid very little in employer taxes for 2020 or 2021. The ERTC is a refundable credit, which means the IRS will give you any amount over your tax liability as a refund.

You Might Qualify Even If You’re Over the Employee Limit

You may have heard you can’t claim the credit if you have more than 500 employees. That’s partially true, but the limit only applies to full-time equivalent employees. Plus, the restriction doesn’t apply to those workers if you kept employees on payroll even when they didn’t work for you.

Charities Can Claim the Credit

You needn’t run a for-profit business to claim the ERTC. Charities such as museums, nonprofit hospitals, and churches can qualify for the credit, too. ERTC eligibility criteria for charities are the same as those for for-profit businesses.

Learn Whether You’re Eligible for the ERTC Today

Missed opportunities with the ERTC can cost eligible employers a fortune, so if you’re unsure whether you qualify, reach out to Dayes Law Firm for advice. We can review your tax situation, tell you whether you qualify, and help you claim this valuable credit.

Contact our firm at (800) 503-2000 for a free consultation.